Brazil Holds Key Rate at 6.50% As Prices Drop, Growth Drifts

By Mario Sergio Lima and Matthew Malinowski

Brazil held its benchmark interest rate unchanged at a record low amid a sharp downturn in inflation and feeble economic activity.

The bank board, led by its President Ilan Goldfajn, on Wednesday kept the Selic rate at 6.50 percent for the sixth straight meeting in a move expected by all 39 analysts in a Bloomberg survey. The meeting was one of the last under Goldfajn, who will step down from his position in the coming months.

In a statement accompanying the decision, board members wrote that the risk of slow growth leading to lower-than-expected inflation had increased. In addition, chances of stronger price pressures stemming from the possible frustration of domestic reforms had moderated.

“The Committee judges that various measures of underlying inflation are running at appropriate or comfortable levels. This includes the components that are most sensitive to the business cycle and monetary policy,” policy makers wrote.

Brazil has withstood turbulence stemming from this year’s presidential vote and global investors’ stampede from risky assets. As the country’s currency weakened to a record low before the October vote, investors started betting on interest rate increases as early as this year. But the victory of Jair Bolsonaro, combined with tepid economic growth and faster-than-forecast deflation, eventually delayed such bets to end-2019.

 

Read full article on bloomberg.com

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